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Knudsen v. Comm'r of Internal Revenue

United States Court of Appeals, Ninth Circuit

July 15, 2015

BARBARA JANE KNUDSEN, Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee

Page 1031

Argued and Submitted, Portland, Oregon: May 4, 2015.

Appeal from the United States Tax Court. Tax Court No. 18048-09. Michael B. Thornton, Judge, Presiding.

SUMMARY[**]

Tax

The panel held that a unilateral concession by the Internal Revenue Service is not a settlement for purposes of the Qualified Offer Rule, reversed a Tax Court decision denying attorneys' fees and litigation costs, and remanded for determination of such costs and fees to be awarded to taxpayer as a prevailing party for purposes of 26 U.S.C. § 7430.

Taxpayer made a qualified offer to settle her petition for judicial review of the IRS's denial of innocent spouse relief. The IRS allowed the offer to expire, but later conceded taxpayer's entitlement to such relief. The panel explained that, given that the purpose of the Qualified Offer Rule is to encourage settlements by imposing litigation costs on the party not willing to settle and that the IRS was unwilling to settle this case on the terms and at the times offered by taxpayer, the IRS cannot subsequently sidestep the consequences of such refusal by conceding the issues after taxpayer had effectively presented her case for disposition by the Tax Court. Accordingly, the panel held that the concession was not a settlement within the meaning of § 7430(c)(4)(E)(ii)(I), and taxpayer was a prevailing party entitled to litigation costs.

Denis M. Vannier (argued), Deputy City Attorney, City Attorney's Office, Portland, Oregon; Jan R. Pierce, Supervisory Attorney, Lewis & Clark Low Income Tax Payer Clinic, Portland, Oregon, for Petitioner-Appellant.

Carol Barthel (argued) and Joan I. Oppenheimer, United States Department of Justice, Tax Division, Washington, D.C., for Respondent-Appellee.

Before: William A. Fletcher and Andrew D. Hurwitz, Circuit Judges, and Donald E. Walter, Senior District Judge.[*] Opinion by Judge Walter.

OPINION

Page 1032

Donald E. Walter, District Judge:

In this case, we are asked to decide whether a unilateral concession by the Internal Revenue Service (" IRS" ) is a settlement, for purposes of the Qualified Offer Rule (" QOR" ) of the Internal Revenue Code, codified at 26 U.S.C. ยง 7430(c)(4)(E). We conclude that this concession was not a settlement, within the meaning of the QOR. Accordingly, we reverse the decision of the United States Tax Court and remand the case for a determination ...


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